Good day, everyone, and welcome to Fresh Del Monte Produce’s Second Quarter 2023 Earnings Conference Call. Today’s conference call is being broadcast live over the Internet and is also being recorded for playback purposes. [Operator Instructions] For opening remarks and introductions, I would like to turn today’s call over to Vice President, Corporate Communications with Fresh Del Monte Produce, Claudia Pou. Please go ahead, Ms. Pou.

Thank you, Rob. Good morning, everyone, and thank you for joining our second quarter 2023 conference call. As Rob mentioned, I’m Claudia Pou, Vice President, Corporate Communications with Fresh Del Monte Produce. Joining me in today’s discussion are Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer; and Monica Vicente, Senior Vice President and Chief Financial Officer. I hope that you’ve had a chance to review the press release that was issued earlier this morning via Business Wire. You may also visit the company’s IR website at investorrelations.freshdelmonte.com to access today’s earnings materials and to register for future distribution. This conference call is being webcast live on our website and will be available for replay after this call. Please note that our press release and our call today include non-GAAP measures. Reconciliations of these non-GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website. I would like to remind you that much of the information we will be speaking to today, including the answers we give in response to your questions, may include forward-looking statements within the provisions of the federal securities laws safe harbor. In today’s press release and in our SEC filings, we detail material risks that may cause our future results to differ from these forward-looking statements. Our statements are as of today, August 2, and we have no obligation to update any forward-looking statements we may make. During the call, we will provide a business update, along with an overview of our second quarter 2023 financial results, followed by a question-and-answer session. With that, I am pleased to turn today’s call over to Mr. Abu-Ghazaleh.

Thank you, Claudia, and good morning, everyone. We are truly pleased with our performance for the second quarter of ‘23. Net income more than doubled compared with the prior-year period. Gross profit and gross margin increased substantially when compared with the same period last year, and we further reduced our debt. In the second quarter, we sold our plastic business in Chile as well as idle lands in South and Central America as part of our commitment to optimize our asset base. We are continuously looking for areas of opportunity within our portfolio to maximize our return on investment. Our core products, banana and pineapple, performed very well in the second quarter, and we continue to see strong demand for our Honeyglow and Pinkglow pineapple varieties, which contributed to the margin improvement in the fresh and value-added product segment. Our avocado program is also growing. We have expanded our customer base and increased sales volume, and we have also diversified our sourcing origins to include Colombia and Dominican Republic and Peru. We continue to refine our pricing and sourcing technology for avocados. We believe this technology is the missing link that will help further elevate our avocado business. As you know, avocado pricing has been historically hard to predict because of the ever-changing market and weather conditions in Mexico. In recent months, we have all witnessed record heat and changing weather patterns. These climate issues are not going to end, and we are seeing these typical weather patterns at the farm level as well. We have embarked on an all-out effort to find solutions for some of these challenges as part of our continuous focus on our Del Monte brand commitment of quality, freshness and reliability. We have several climate-related projects in the works that get to the root of…

Thank you, Mohammad, and thank you for joining us on today’s call. Let’s turn to our second quarter of 2023 financial results. Net sales for the second quarter of 2023 were $1.18 billion compared with $1.21 billion in the prior year. The net sales variance was primarily driven by the fresh and value-added products segment, specifically lower per unit pricing of avocados due to market conditions, as Mohammad mentioned, and lower sales volume of nontropical fruit. This was partially offset by increased net sales of bananas, driven by higher pricing and volume. Gross profit for the second quarter of 2023 was higher by $36 million, an increase of 45% compared with the prior-year period. Gross profit benefited from lower product and distribution costs in the fresh and value-added product segment, combined with higher banana profitability. Operating income was $72 million compared with $34 million in the prior year, and adjusted operating income was $68 million compared with $33 million. The increase in adjusted operating income was primarily due to the higher gross profit. FDP net income for the second quarter of 2023 was $48 million compared with $21 million in the prior year, and adjusted FDP net income was $46 million compared with $21 million. Our diluted earnings per share was $0.99 compared with $0.44 in the prior year. Adjusted diluted earnings per share was $0.96 compared with $0.43. The difference of $0.03 per share between GAAP and adjusted diluted EPS during the second quarter of 2023 was related to the gain on sale of underutilized assets. Adjusted EBITDA for the second quarter of 2023 was $85 million compared with $56 million in the prior year, and corresponding adjusted EBITDA margin was 7.2% compared with 4.6% in the prior year. Let’s now turn to the segment results, beginning with our…

[Operator Instructions] And your first question comes from the line of Mitch Pinheiro from Sturdivant & Co. Your line is open.

Hi, good morning.

Good morning, Mitch.

Good morning.

So first, I want to talk about the fresh and value-added. Sales were down. I’m just trying to – I don’t see the queue yet. So I wanted to get some of the detail, but – so pineapple sales were up, correct?

Yes. Overall, the segment was down because of avocados, because of the selling price and the volume of non-tropicals. But all the other products had higher selling prices, and that’s what caused the fresh and value-added segment to be lower, but it was still a strong performance.

Okay. I guess $55 million down year-over-year, avocados couldn’t have been – so avocados were down, what, maybe 50% in the quarter. Is that a...

So what happened with avocados, I don’t know if – if you recall last year, the pricing on avocados was extraordinarily high. This year, avocados sell prices are approximately half of what they were last year. So the impact of avocado selling prices is significant. It doesn’t really impact our profitability on the avocado because the cost goes down as well. But the pricing definitely had a huge impact.

On revenue.

Okay. And in terms of fresh fruit and the fresh-cut veggie business, that was – they were up in the quarter?

The fresh cut – yes, I’m not sure we’re giving all those details at – we’re talking the fresh and value-added segment, includes all those products, yes.

Yes. So was fresh-cut fruit and fresh-cut vegetables up year-over-year?

Fresh-cut fruit and fresh-cut vegetable were basically flat.

Okay. And are you seeing any – I mean is it flat because on the retail side or flat due to food service?

In the case of fruit, we have capacity issues in terms of processing more fruit, which we are addressing as we speak. In case of vegetables, there has been a decline in terms of vegetal volumes and revenue.

Is that – I mean, is that – is it a food service issue? Or is it a channel issue? Or is it across all channels is really...

Across all channels, Mitch.

Okay. And when you look at Honeyglow and the Pinkglow, how big is that within your pineapple business? I mean I know it’s small, but it’s growing. And I’m just curious where we are now.

Listen, you need to have into consideration that we are not only a North America with Honeyglow. Honeyglow is global. We produce in Costa Rica, we produce in Kenya, and we produce in the Philippines. So we have Honeyglow on these three sourcing areas. And it’s about ranging between 25% to 30% of our total volume. So we have a very strong position in this. I know that competition has tried to imitate and copy what we have been doing for the Honeyglow. But I believe that, Fresh Del Monte has the technology and knowledge because we have started this several years back. And we have, I believe, kind of fine-tuned and have the technologies to produce this in a much more efficient way as well as a higher percentage. So we have a very strong position in the global market and not only in North America. North America actually was the last one to follow after Guinea and the Philippines. So we haven’t seen the potential yet of optimization in North American market. We’re just starting actually a few quarters ago. So I believe going forward, that will become a more impactful.

Okay. And then on the banana side, I guess this is one of the strongest margin quarters I’ve seen in quite a while. I think I went back to 2017 with the last time your banana business had this margin in the second quarter. What – I mean, what drove that? And is any of this sort of sustainable into the third quarter?

Well, third quarter, as you know, historically, that the third quarter and fourth quarter and the second half of the year is usually much softer on the bananas than the first half because of the summer fruits and competing other items and the heat and occasions, as you say, out of school. But what really drove this, in my opinion, is that we have kind of rationalized, and kind of demand and supply were more synchronized in a way that we didn’t have peaks in supply where demand wasn’t there. And that has helped a lot in terms of maintaining kind of equilibrium as well as not eroding our margins by having a lot of waste and regions [ph]. That’s number one. Number two, I think that the cost in terms of the freight and other inputs have helped as well. I don’t believe pricing has increased a lot compared to the previous years. We are more or less on the same – more or less in the same range. However, it’s more rationalization, more optimization of our assets. Like I have said, it’s many other factors that have helped the banana, in general, to improve the margins and maintain cost at a reasonable level. So, even though we have been impacted negatively with the foreign exchange in Costa Rica, in particular, last year, for instance, was around 650 or 550 – no, I think it was around…

600 and...

Yes, 600-something. Today, we are talking about 450, 445. So, you can see the impact of that kind of strength of the [indiscernible] that has impacted our costs tremendously.

And Mitch, I think we also need to remember that last year’s second quarter was actually a lower than normal second quarter. Usually, our Q2 is our strongest quarter because of the inflation, and we hadn’t caught up with our pricing, etcetera. So, that really – the comparison is also a little bit – it’s impacted because of that, too.

Okay. And so is this still a part of your efforts to continue to focus on profitable volume, you are no longer just taking any volume at any cost, that’s all part of this, correct?

That is correct.

Okay. And right now, is the supply and demand balanced? How would you describe that for the upcoming quarter in the global market?

It’s a normal, I would say that what we see right now in the third quarter, as we started – this is a – we are just starting in the second month of the third quarter. So, we see a pattern like the historical patterns that the market – and the banana market and the consumption has gone down quite – not drastically, but definitely in the same kind of mode of historical numbers and statistics. So, I believe that it’s not a total collapse, but it’s definitely softer, much softer than the second quarter and the first quarter.

Sure. And last question. It was nice to see the asset sales in the quarter. Are there anything left in terms of asset sales of significance?

I would like to tell you one thing that Fresh Del Monte is so rich with assets across the world. It’s not that we are going to sell our assets just for the sake of selling assets, no. We are selling assets that are really underutilized or not even utilized, lands, buildings, businesses that we believe it will – their margins are too little like the plastics, for instance, that’s where we kind of spin it off. This is the kind of assets that we have. We do have other assets that we may sell, but not in the same kind of pace that we have done during the last couple of years.

So, you will still optimize your portfolio – your asset portfolio, but it’s going to slow down a little bit?

Yes, for sure. But like I said, there are other things that are mitigating this. I mean as I have said on the last call, if you remember, Mitch, I said that we have so many projects and so many initiatives in the pipeline that will change our business, going forward. I can’t kind of give details, but there is so much in the pipeline that will transform our business from what you see today to the future.

Okay. Well, thank you for the questions.

Thank you.

And we have reached the end of our question-and-answer session. I will now turn the call back over to management for any final closing comments.

Thank you so much, everyone. I appreciate your attendance today and hope to talk to you on the next call. Wish you a good day. Thank you. Bye.

This concludes today’s conference call. Thank you for your participation. You may now disconnect.